Replacement of Older Cars Continues to Drive Auto Loan Growth

The continued demand for new cars from consumers ready to replace their 10-year old vehicles, on average, has helped auto loans grow to $207 billion, according to Equifax.

That figure is as of year to date through June and is a 13.7% increase over the volume experienced during the same period in 2011, the data in Equifax’s latest National Consumer Credit Trends Report showed.

During the first half of the year, sales of new cars and light trucks increased nearly 15%. Consumers are flocking to smaller, more efficient and cheaper vehicles, according Equifax.

At 10.7 million loans, auto lending is experiencing the highest volume since 2007, when 11 million loans were originated, the report noted.

Equifax said delinquency and write-off rates on auto loans and leases are well below levels at the start of the recession. In August, write-offs in terms of dollars were one-third of what they were at the peak in March 2009 at 2.1% and 6.1%, respectively. Write-off rates using both dollars and units exceeded 4% at the start of the recession.

Equifax Chief Economist Amy Crews Cutts said the average age of cars on the road today in the U.S. is the highest ever recorded, and consumers are ready to replace these older vehicles.

“At the same time, the financial picture has improved sufficiently that we are seeing auto lending markets become facilitators rather than obstacles to meeting this demand, especially in the near-prime segment of the market that had all but ceased to exist during the worst of the financial crisis and recession,” Cutts said in a statement.